Lower Growth Forecasts and Continued Political Indecision Rock Stocks

Today's financial recap and tomorrow's financial outlook.

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The IMF lowered its global and developing country growth forecasts yesterday evening. Global growth forecasts for 2013 were lowered to 2.9% from the prior forecast of 3.1% in July. Forward forecasts for 2014 were lowered to 3.3% from 3.6% in July. Lower growth in China, Mexico, India, Russia, and Indonesia were seen as the primary reasons for the reduction.

President Obama officially nominated Fed Vice Chairwoman Janet Yellen to be Chairwoman of the Federal Reserve once current Chairman Ben Bernanke's term ends on January 31 of next year. Equity futures initially rallied when the news was announced last night. Long duration US Treasuries sold off on the idea that dovish monetary policy would be around for a longer period of time.

The S&P 500 (INDEXSP:.INX) opened up a few points, but quickly fell to -9 points, its low of the day, before European markets closed. News reports in the early afternoon indicated that some progress was being made in Washington to raise the debt ceiling and reopen the government, causing stocks to rise. Telecom sector stocks were the top performers with large gains inCenturyLink (NYSE:CTL), Verizon (NYSE:VZ), and AT&T (NYSE:T). Consumer-related stocks were the worst performers, in large part because of the earnings misses from Yum Brands (NYSE:YUM) and Family Dollar (NYSE:FDO).

The Federal Reserve released the minutes of the September FOMC meeting. Most members supported a tapering of purchases sometime before the end of the year and an eventual winding down of purchases by mid-2014. The minutes showed that the decision not to cut purchases was a close call. Even though the market largely expected the decision, mixed economic data and fiscal uncertainties were enough to sway the committee to refrain from taking action.

Family Dollar reported fiscal fourth-quarter earnings, missing on both earnings per share and revenues. Guidance on the full-year earnings and the next quarter's comparable sales were much lower than expected. The company commented that the economic environment had been much more challenging than expected. Costco's (NASDAQ:COST) earnings missed analyst expectations slightly, but the stock finished up 2% on the day.

Jos. A Bank Clothiers (NASDAQ:JOSB) announced that it was offering $2.3 billion in cash (or $48 per share) to take over its competitor Men's Wearhouse (NYSE:MW). Men's Wearhouse rejected the offer, saying that the bid significantly undervalued the company and wasn't in the best interest of Men's Wearhouse. Both companies showed more than 10% gains before the announcement and sold off modestly.

Tomorrow's Financial Outlook

The Labor Department announced that jobless claims would be released tomorrow on schedule. However, August import and export prices will not be released due to the government shutdown. Economists expect jobless claims to rise to 310,000 from 308,000 last week, which would be more than the 305,000 four-week average.

The Bank of England will make its monthly monetary policy decision tomorrow before the US market opens. Other global market-moving economic data releases include Japanese consumer confidence, Australia's unemployment rate, and Chinese credit growth. ECB President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda will give speeches.

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